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Technology Stocks : Applied Micro Circuits Corp (AMCC) -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (288)	1/13/2000 6:31:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 1805

>Wuhtz NN? on another board, NN would be the illustrious NotNeiderhoffer. on this board, however, i deduce that it is Nortel Networks (cf. NT). as promised, via Goldilocks ... (PM me if you'd like the glossy .pdf). ----- January 11, 2000 Recommended List Applied Micro Circuits : Solid Quarter; Raising Estimates Significantly; RL AMCC reported EPS of $0.21, $0.03 higher than our original expectations for the quarter on 20.7% sequential revenue growth and a 100 basis point improvement in gross margins. Although AMCC pre-announced positive results last week, these results exceeded the high end of their expected range. The company saw strong sequential bookings growth from both its largest customer, Nortel and several other top-tier equipment manufacturers, but Nortel was the clear driver of this quarter's upside, at 40% of revenues. We are significantly raising our estimates for fiscal 2000 from $0.65 to $0.71, and for fiscal 2001 from $0.93 to $1.11. We continue to recommend purchase of the company's shares. AMCC FIRING ON ALL CYLINDERS AMCC grew revenues nearly 21% sequentially in the December quarter, with the strength coming primarily from communications. Nortel, now 40% of revenues, is clearly driving the company's business momentum, but non-Nortel customers continued to grow in the double digits, albeit a bit slower than the prior quarter. The company reported a book-to-bill in excess of 1.46, however, adjusted for the transition the company is seeing to contract manufacturers at Nortel, the book-to-bill for the 3-months hence would have been around 1.2. This, however, was also better than the 1.15 book-to-bill number the company posted in the prior quarter. On all accounts this was a solid quarter and the confidence level just continues to rise as Nortel gains share in the optical networking market. MORE PRODUCT ANNOUNCEMENTS TO COME The company introduced only a few products this quarter, after a remarkable pace of introduction during the September quarter. The company does have quite a few designs in its pipeline, however, including several OC-192 solutions, which will soon likely be launched. The company has the internal capabilities to offer a significant percentage of the total system level solution required by customers from OC-3 rates to OC-192 and we believe the slew of announcements to come this quarter will act as catalysts for the shares. While the Cimaron revenues only reached $1.2 million in the quarter, up from $700K last quarter, we still believe that Cimaron's higher layer products are generating a large number of design wins and should provide over $20 million in revenues in fiscal 2001. ESTIMATES KEEP ON RISING AMCC delivered both top and bottom-line growth that exceeded our expectations quite significantly. Despite the strong near-term results, the out quarter expectations continue to get revised upwards as well. Although the stock has clearly had a tremendous run over the last several weeks, and its multiple has expanded with the rest of the communication IC group, the significant upward revisions in estimates continue to bring EPS growth rates and stock prices more in-line. We still believe that our EPS estimates are likely to prove conservative, even at these higher levels, and as a result we continue to recommend purchase of the company's shares. Details on the quarter: Revenues came in at $45.8 million, 8% higher than our estimate and up 21% sequentially. Gross margins expanded 100 basis points to 71.1%, due to improved capacity utilization and yields, as well as a more favorable mix of standard communications products. Operating margins also expanded 370 basis points sequentially to 37.6% due to the higher than expected top-line growth and gross margins. The balance sheet also strengthened with a $10.2 million increase in the company's cash position and an improvement in inventory turns (5.0X vs. 4.3X). Strength in the quarter was driven by significant revenue growth from the company's communications products. Communications revenues grew 25% sequentially with Nortel growing roughly 36% and non-Nortel customers growing roughly 18%. While this strength is not as broad-based as it was in the prior quarter, it continues to be robust. While many new design wins are occurring at both the OC-48 and OC-192 speed grades, the bulk of the company's revenues this quarter remained at OC-12 and OC-48 rates. OC-12 represented roughly 33% of sales, while OC-48 products made up over 60% of the total. As a further note, CMOS products accounted for roughly 15% of the company's revenues this quarter. Non-communications revenues, which include PCI controllers, ATE and military products actually grew 5% sequentially, with $1 million of the Raytheon last-time buy order recognized. Outlook for the stock: We continue to believe that AMCC's shares will move higher as the company delivers superior financial results and introduces new CMOS and SiGe products for OC-48 and OC-192 applications. While the company's valuation is among the highest in the group, AMCC's results continue to surprise quite significantly on the upside. In fact, given the slower moving nature of the markets that the company's products address such a feat is even more remarkable. AMCC remains one of our favorites in the group and we continue to recommend purchase of the company's shares.